A redundancy is when an employer needs to dismiss an employee because:
While there’s no legal definition of a restructure, it will involve an employer making changes to its workforce. This could involve making redundancies, but it could also involve making changes to employees’ contracts (including changing salaries, places of work, duties, job titles or line management). Read more about how changes can be made to employment contracts here.
The key elements of a fair restructuring and redundancy process include:
All employees who face the risk of redundancy must be consulted first. A proper consultation process involves holding meetings with employees, and is a chance for the employer to explain the reason behind the redundancy, how they will select individuals for redundancy, and what each employee’s statutory redundancy entitlement is. The consultation process is also a chance for the employees to ask any questions. It’s important that the consultation process happens before any final decisions are made about redundancy. A pre-determined decision will not lead to a fair consultation process, and if the employer gets the process wrong this can lead to Employment Tribunal claims for unfair dismissal.
From the group of affected employees (referred to as the “redundancy pool”), an employer will need to use selection criteria and follow a fair procedure to decide who should be made redundant. The selection criteria should be objective, not subjective, meaning it could include things like:
Sometimes there will be a need to conduct competitive interviews in order to achieve a fair process.
Yes. As part of the restructuring and redundancy process, the employer must consider alternatives, including suitable alternative employment, which might be able to save jobs and avoid the need to make employees redundant. If an employee is on maternity, adoption or shared parental leave then they have priority over others when it comes to offering alternative employment. Sometimes an employee should be offered a trial period if the particular job may not be suitable alternative employment for them.
Yes. Voluntary redundancy schemes can be an effective way of reducing or avoiding the need to make more employees redundant down the line. However, it might not always be suitable, and employers should explain, when inviting volunteers, that they don’t have to automatically accept each volunteer’s application for voluntary redundancy.
If an employee has been with their employer for 2 years or more, they are usually entitled to redundancy pay if the employer makes their position redundant. Sometimes an employer will have a policy where they pay employees redundancy pay that’s better than the legal minimum (often called “enhanced redundancy pay”). However, where an employer doesn’t have such a policy, the employee will be entitled to the legal minimum redundancy pay (referred to as “statutory redundancy pay”), which is calculated as follows:
*but subject to a maximum 20 years and a maximum weekly pay set by the Government (currently £571).
Employees are also entitled to a statutory notice period, or a longer notice period under their employment contract, and may also have a holiday pay entitlement.
Potentially yes. If an employer makes an employee’s position redundant but offers them another job role with the same employer that’s very similar to the job they’re currently doing (referred to as “suitable alternative employment”) and they reject that role without a good enough reason, they will lose their right to redundancy pay.
Yes. If an employer is making 20 or more redundancies in a 90-day period, special rules apply (referred to as “collective consultation”). A collective redundancy process involves:
Unless there was a very good reason why the employer couldn’t follow these rules on collective consultation, its employees could be entitled to be awarded compensation (called a “protective award”) by the Employment Tribunal. Compensation in collective redundancy cases can be up to 90 days’ full pay per employee.
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